BBA Group enters 2006 with two strong businesses, Aviation Services and Fiberweb, each with market leading positions and strong growth potential.

In November 2005, the Board decided to separate the businesses by the sale of Fiberweb or via demerger, a strategy which will allow them the freedom to pursue their own separate strategies in their separate markets.

Aviation

Strategy

The primary markets we currently serve are:

• Airport Services
• Maintenance, Repair and Overhaul

Our strategy is focused on building a balanced portfolio of aviation business, concentrating on airport services and aftermarket businesses with good returns and strong cash flows.

Since 2001, in constant currencies, sales have grown from £649 million to £892 million, a compound annual growth rate of 8 per cent of which roughly half has been organic and half through acquisitions funded through free cash flows. During this period, our focus has remained on services and aftermarket support. This growth has come against a backdrop of wars, SARS, record oil prices, turmoil in aviation markets and economic slowdowns, which is a reflection of the resilience and potential of the business.

Performance

The market for both business and commercial aviation continues to grow. Sales for the year increased by 9 per cent to £892 million. Whilst fuel costs have risen to record levels during the year, the impact on our profits has been minimal as we do not take ownership of fuel in commercial aviation, and in business aviation increases have been passed through our retail pricing.

Airport Services

Airport Services saw sales growth of 23 per cent to £515 million, underlying operating profits up by 20 per cent to £60 million. Underlying operating margins were slightly lower at 11.7 per cent down from 11.9 per cent. Signature Flight Support is the world's largest and leading FBO network and service provider to business aviation with 80 locations at airports worldwide. In the last two years, we have doubled our position outside North America from 17 to 34 bases.

During the year we acquired a total of five FBO's for a total of £17 million and those acquisitions made in 2004 have been successfully integrated. Signature continued to grow its network with acquisitions in Cape Town, Paris Le Bourget, Long Beach and Oxnard California, with investment in further capacity at London Luton. Signature now has 80 locations worldwide of which 34 are now outside North America, making us the largest and only truly international business aviation support chain in the world. A three-year agreement to provide advertising space in selected locations was signed with Clear Channel during the year.

Our strategy is to grow Signature and our business aviation interests aggressively both in North America and the rest of the world.

ASIG is the leading fueller of commercial aircraft in the USA and the UK, and overall the world's fourth largest independent provider of support services for fuelling, ground handling, de-icing, cargo and other related services. It operates in 65 cities worldwide, including 44 of the world's top 100 airports. Our acquisitions of AGI and Boker in 2004 were successfully integrated and have performed to plan since acquisition. New contracts were won with Disney, Northwest Airlines, All Nippon, Cathay Pacific and Singapore Airlines. Coronet Aviation Services was purchased in September 2005 providing ASIG with a good initial position in executive lounge services at London Heathrow.

In the commercial aviation market we see opportunities to grow geographically and through expansion of product offerings in niche areas where we can see good returns.

Maintenance, Repair and Overhaul

We are the industry's leading independent turbine engine repair and overhaul provider, focused on business and regional jet engines, with growing positions in military and industrial platforms. We will continue to focus on these areas in the near term whilst looking for geographic growth opportunities.

In Component Repair, Overhaul and Distribution, we have a number of speciality companies with high returns. We will be looking to grow this sector via further acquisitions.

Sales were down from £402 million to £377 million reflecting the relocation of the Millville, New Jersey sites and lower revenues from Spey engines, offset by growth in the newer TFE731 programme. Underlying operating profits were £34 million (2004: £37 million) and underlying operating margins were unchanged at 9.1 per cent (2004: 9.1 per cent).

At Dallas Airmotive, the Pratt & Witney PW300 and 500 programmes, for which we reported winning full authorisations last year, started to build in the second half. In the UK, H&S Aviation received approval to overhaul the Pratt & Witney JT15D in Europe.

Our speciality components businesses, ITS and Barrett, saw growth in sales and margins and we acquired International Governor Service (IGS) in Colorado, specialising in turbine engine fuel system accessories, which will provide around US$10 million incremental sales on a full year basis. At APPH, our hydraulics and landing gear business in the UK, demand increased with the upturn in the aerospace cycle. In the first quarter of 2006 APPH acquired Arnoni Aviation Services Inc., based in Houston, Texas, for a consideration of up to £4 million. This repair and overhaul and spares distribution company specialises in support for a number of aircraft including Raytheon HS125 Hawker Series. Sales are expected to be £7 million in 2006. In December, APPH was awarded the contract to design and develop the landing gear system for the Korean Military Helicopter Programme with a value of $7 million over six years with further potential for long term revenues for logistic support and repair and overhaul.

In Oxford Airport (UK) training demand improved and the airport is seeing more business jet activity where we are investing in increasing hangar capacity and enhancing the runway.

Finally, Becorit, our railway brake equipment company in Germany, which is included in this business grouping, had another satisfactory year.

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Materials Technology

Strategy

The strategy for Materials Technology is:

• To grow differentiated, tailored non-woven solutions in attractive industrial sectors, such as construction, filtration and graphic arts
• To expand in fast growing markets in Asia and Latin America
• To further develop our leading customer relationships in large, growing hygiene markets
• To continue to improve productivity, particularly in North America.

Performance

In 2005, Materials Technology, under the brand name 'Fiberweb', increased sales by 12 per cent to £619 million. Underlying operating profit declined by £5 million to £44 million due to the continued increase in raw material input prices which adversely impacted operating profits by £12 million compared to 2004. Operating cash flow was good again at £44 million despite the cash cost incurred in closing the Toronto plant and relocating its two production lines to existing plants in Mexico and Germany.

Midway through the year a new management team, led by Daniel Dayan, joined the business and after reaffirming the strategic direction of the business has accelarated the implementation of cost reduction measures and investment in product innovation.

At the end of the first half we sold our 40 per cent investment in Finotech, based in Germany, to Clopay, our joint venture partner. Sale proceeds were £46 million and this resulted in a gain to the Group of £24 million.

Following high raw material costs at the start of the year there was some reduction by the half year and at the time of our interim announcement there was an expectation that prices could ease further through to the year end. In the event, the dual impact of rapidly rising oil prices and hurricane damage to the petrochemicals capacity on the US Gulf coast, led to tight supply conditions and record prices during the fourth quarter.Since the end of 2005, prices have eased somewhat although the outlook for the rest of the year remains uncertain. We continue to focus on a wide range of productivity initiatives to optimise yields and improve recycling.

In North America the closure of our Toronto site and the reconditioning and relocation of two production lines to Mexico and Berlin is on schedule to be completed in the summer of 2006. Full year savings are expected to be in the region of £5 million with cash pay back expected within three years. The Mexican site at Queretaro will enable Fiberweb to consolidate and expand in the Americas region, and the resulting 40 per cent capacity increase in Berlin will allow Fiberweb to exploit further rapid growth in construction markets in Eastern Europe.

In the Industrial business, significant progress has been made in accelerating new product development. During 2005, Fiberweb housewrap sales grew by 20 per cent, the sixth straight year of volume and value growth. The launch of products capable of protecting property by withstanding hurricane-force winds have generated significant interest in coastal areas of the US. In pool and spa filtration, where Fiberweb is the market leader, the launch of a biocide impregnated filter resulted from a real focus on the needs and concerns of the consumer. Further sales and marketing investment has been initiated in Brazil to accelerate the growth of industrial products in South America, and developing growth plans for industrial segments in Europe and Asia are priorities for 2006.

In the Hygiene business the focus has been on cost reduction and improving customer relationships. The authorisation of a major new spunbond line in Sweden, expected to be commissioned in early 2007, will increase quality and productivity in the European market. A number of collaborative development programmes with customers have demonstrated that product development continues to be a core strength and differentiator.

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Future Group Strategy

In November last year, we announced our intention to separate Fiberweb from BBA. Over the last few years both businesses have been grown, both organically and by acquisition, so that each of them have achieved the critical mass that now allows them to stand alone as strong, independent companies in their own right. Each business has an excellent market position, with leadership in several areas, and they are increasingly international in their presence. We believe both businesses have a strong sense of focus and are well positioned to grow further, acting as consolidators in their markets. These are the reasons why we have decided that it is the correct time to separate Fiberweb from the BBA Group and we are convinced that this will deliver more shareholder value in the long-term.

As we proceed with the separation of Fiberweb we are also accelerating the efforts to improve our operational performance, particulary in our Fiberweb North American Hygiene and our Aviation Engine Repair businesses. The growth of our Aviation businesses both organically and by acquisition remains a priority.

We therefore look forward to a challenging year with confidence.